Anonymity Analysis of Cryptocurrencies

Cash in the real world allows for parties to exchange currency without the need to go through some sort of central authority. One person, Alice, can simply hand cash over to another person, Bob. In this transaction the only two people that have knowledge of this exchange are Alice and Bob. Until recently there was no electronic equivalent to this exchange. In 1982 David Chaum proposed a system of anonymous electronic cash based on blind signatures, and in 1990 founded DigiCash as an electronic cash company. There were a few banks that implemented electronic cash systems, but these banks and DigiCash ultimately went bankrupt in 1997 and 1998 despite the enthusiasm surrounding anonymous electronic cash. Between 1998 and 2008 there were no successful implementations of electronic cash that offer a decentralized, anonymous, and untraceable system. In 2008 a paper was published by Satoshi Nakamoto on the cryptocurrency known as Bitcoin. A cryptocurrency is a form of electronic cash backed by mathematical and cryptographic constructs, unlike traditional currency which was historically backed by gold or silver. Cryptocurrencies have seen rising popularity in recent years due to their decentralized, distributed, peer-to-peer protocols. Part of this rising popularity is also attributable to the supposed anonymity of these protocols; however, due to the public transaction history required for these protocols and the fact that transactions are pseudonymous and not purely anonymous, this supposed anonymity does not exist. While the systems may achieve the goal of decentralized currency it does not achieve the goal of untraceability. In this thesis we analyze the technical implementations of Bitcoin and other cryptocurrencies to determine the level of anonymity provided by these protocols. We also analyze proposed improvements for their feasibility